Two departments: Lenders engaging in urban renewal project loan operations should adhere to market-oriented and rule of law principles.

On August 28, the Financial Regulatory Authority and the Ministry of Housing and Urban-Rural Development issued the "Interim Measures for the Management of Loans for Urban Renewal Projects." The document states that lenders engaged in loan services for urban renewal projects should adhere to the following principles: (1) Uphold market-oriented and rule-of-law approaches. Lenders should provide loan support for projects under the premise of lawful compliance and commercial sustainability, making autonomous decisions, bearing risks independently, and bearing profits and losses. They must not increase hidden debts of local governments. (2) Maintain coordinated planning and positive order. Lenders should promote implementation meticulously and according to the requirements of the "Opinions," supporting the financing needs of eligible urban renewal projects. (3) Ensure risk control. Lenders should fully consider the characteristics of urban renewal projects, reasonably determine the loan amount, term, interest rate, etc., strengthen credit approval and risk management based on a comprehensive calculation of project returns, and strictly implement dedicated use and closed fund management. Original text: Interim Measures for the Management of Loans for Urban Renewal Projects Chapter 1 General Principles Article 1 In order to deeply implement the major decisions and deployments of the Central Committee of the Communist Party of China and the State Council on building a new model for real estate development and promoting high-quality urban renewal, this measure is formulated to provide financial services for urban renewal projects and to promote the smooth and healthy development of urban renewal project loans, based on the "Opinions of the General Office of the Central Committee of the Communist Party of China and the General Office of the State Council on Continuously Promoting Urban Renewal Actions" (hereinafter referred to as the "Opinions") and relevant laws and regulations. Article 2 The term "lender" in these measures refers to financial institutions such as commercial banks, rural cooperative banks, and rural credit cooperatives established in accordance with the law within the territory of the People's Republic of China that accept public deposits. Article 3 The term "urban renewal project loan" in these measures refers to loans issued by lenders to support the development, construction, renovation, and other uses of urban renewal projects that meet the requirements of the "Opinions." Article 4 Lenders engaged in urban renewal project loan services shall follow the following principles: (1) Uphold market-oriented and rule-of-law approaches. Lenders should provide loan support for projects under the premise of lawful compliance and commercial sustainability, making autonomous decisions, bearing risks independently, and bearing profits and losses. They must not increase hidden debts of local governments. (2) Maintain coordinated planning and positive order. Lenders should promote implementation meticulously and according to the requirements of the "Opinions," supporting the financing needs of eligible urban renewal projects. (3) Ensure risk control. Lenders should fully consider the characteristics of urban renewal projects, reasonably determine the loan amount, term, interest rate, etc., strengthen credit approval and risk management based on a comprehensive calculation of project returns, and strictly implement dedicated use and closed fund management. Chapter 2 Loan Requirements Article 5 Lenders shall implement the specific responsible departments and positions for urban renewal project loans as stipulated in these measures, clarifying the management and implementation processes for urban renewal project loans. Article 6 Lenders shall establish a "loan for urban renewal projects" category to support projects that meet the requirements of these measures. Article 7 Projects applying for urban renewal project loans must comply with the provisions of the "Opinions" and meet the following conditions: (1) Comply with national policies on industry, land, environmental protection, etc., meet fixed asset investment requirements, and have relevant administrative approval documents that are legal, complete, authentic, and effective. (2) Comply with national regulations on urban renewal and be included in urban renewal planning based on urban health assessment results, complying with spatial planning and special planning in the field of urban construction. (3) Included in the urban renewal project database. (4) Comply with relevant capital fund system regulations. (5) Clearly defined implementing entities, and prepared project implementation plans and feasibility study reports in accordance with relevant national and local regulations. (6) Meet the overall characteristics of the project. (7) Possess sufficient operating income to cover the loan principal and interest. (8) The project borrower is a market-oriented operating entity with relevant operating qualifications and a good financial credit standing. (9) Other conditions required by the lender. Article 8 Lenders shall verify the use of loan funds for urban renewal projects. They must not use the funds to pay land transfer fees and related taxes, for land acquisition, demolition, and resettlement compensation in the preliminary stages before the land is supplied as net land, nor for expenditures that should be guaranteed by government funds as stipulated. Article 9 Lenders shall comprehensively consider the actual financing needs of the project and other factors such as cash flow available for principal and interest repayment, and determine the loan amount reasonably. For projects with relatively large loan amounts, financing support should be provided primarily through syndicated loans to prevent excessive credit extension. Article 10 Lenders shall reasonably determine the loan term and interest rate based on the actual situation of the project construction and operation cycle, repayment sources, funding costs, etc., while complying with relevant national regulations and industry self-regulatory management requirements. Article 11 When assessing the repayment sources of urban renewal projects, lenders must ensure that the repayment sources and plans are feasible and that cash flow adequately covers the loan principal and interest. They must not relax loan reviews due to a project's inclusion in urban renewal planning, urban renewal project databases, etc., nor accept any form of government implicit credit enhancement measures. Article 12 Lenders shall manage and control the payment of loan funds in accordance with the relevant provisions on loan disbursement and payment, strictly disbursing loans according to project progress, and clarifying loan disbursement and payment review requirements, conditions for fund withdrawal, etc., in conjunction with their own credit management requirements. Article 13 Lenders shall reasonably set up guarantee measures based on the characteristics of urban renewal projects. They can establish receivables arising from operating rights, charging rights, etc., as loan collateral and use various methods such as fund supervision and centralization to ensure loan security. They must not use government payables, non-revenue-generating public assets, or legally non-compliant operating assets for collateralized financing. Article 14 Lenders may design comprehensive financial service plans based on the characteristics of urban renewal projects, combining various financing tools to meet reasonable financing needs. Projects that are controllable in risk, commercially sustainable, and meet eligibility criteria should be encouraged to adopt diversified financing models for support. Chapter 3 Risk Management Article 15 Lenders shall sign a fund supervision agreement with borrowers based on the principles of dedicated use and closed operation, and implement the following requirements: (1) Borrowers shall open project fund supervision accounts at the lending bank, and all project capital, loan disbursements, payments, project revenues, loan repayments, and other project-related funds as stipulated in the contract must be conducted through the fund supervision account. (2) Borrowers must ensure that projects operate independently and under closed management, with funds between projects not mixed, and the diversion of project funds for other uses is strictly prohibited. (3) Lenders shall strengthen monitoring of the use of project funds, and if they discover that borrowers have diverted project funds, they shall take appropriate measures according to the contract. (4) After a project enters the operational phase, lenders shall regularly monitor the project's operation status and strengthen the centralized management of operating income and other repayment funds. Article 16 Lenders shall regularly check and analyze borrowers' compliance with contracts, governance, credit status, project construction, and operation. They shall dynamically monitor and reassess the value of collateral and the guarantee ability of guarantors, effectively managing and timely warning against loan risks, and actively taking effective measures to ensure the safety of creditor rights. Article 17 Lenders shall establish a monitoring mechanism for urban renewal project loan information, conducting specialized statistics on urban renewal project loans and enhancing monitoring of progress, loan disbursements, and repayments. Article 18 Lenders shall strictly carry out risk classification in accordance with regulatory requirements. If risks arise in loans, they should actively take risk resolution and disposal measures. In cases of write-offs, they should actively recover losses after write-off as stipulated. Chapter 4 Supervision and Management Article 19 The National Financial Supervision and Administration Authority and its dispatched agencies shall supervise and manage the urban renewal project loan business in accordance with the law and may propose relevant prudential regulatory requirements for lenders based on their operational management conditions, risk levels, and the development of urban renewal project loans. Article 20 If lenders conduct urban renewal project loan business in violation of these measures, the National Financial Supervision and Administration Authority and its dispatched agencies shall order them to make corrections within a specified time and may take regulatory measures or impose administrative penalties on relevant institutions or personnel in accordance with the law. Chapter 5 Supplementary Provisions Article 21 If the specific contents of urban renewal projects are governed by special policy regulations, they must also comply with relevant provisions. Article 22 Urban renewal project loans issued by non-bank financial institutions established with the approval of the National Financial Supervision and Administration Authority shall refer to these measures. The Export-Import Bank of China and the Agricultural Development Bank of China shall conduct urban renewal project loan business within the approved business scope and types as per the State Council while selecting eligible urban renewal projects for credit support based on their own functional positioning, and strengthening loan management according to these measures and relevant regulations, without deviating from their primary responsibilities and operating beyond their business scope. Article 23 These measures are interpreted by the National Financial Supervision and Administration Authority in conjunction with the Ministry of Housing and Urban-Rural Development. Article 24 These measures shall come into effect from the date of issuance. New borrowing contracts signed from the implementation of these measures shall be executed according to these measures. This article is selected from the "Financial Regulatory Authority" official website, edited by GMTEight: Li Fo.